Securities-based lending: how securities-backed loans work.

• i
  Pledge. The shareholder pledges a defined number of listed shares to a qualified custodian, under bankruptcy-remote arrangements. Beneficial ownership stays with the shareholder; depending on the market and structure, the custodian may hold legal title on bare trust for the duration of the loan. How a pledge differs from a share charge or a title transfer, and when a lender may re-use pledged shares, is set out in pledge, share charge or title transfer.
• ii
  Loan-to-value (LTV). The lender advances cash equal to a defined percentage of the pledged shares’ market value, calibrated to the position’s liquidity profile, the underlying’s volatility, and the structure’s recourse profile. There is no published rate card; LTV is set per position after review. To see the indicative territory, try the indicative LTV calculator (illustrative only, not a quote).
• iii
  Tenor. Typically 12 to 36 months for institutional transactions, with extension options sometimes negotiated. Shorter and longer structures exist for specific use cases.
• iv
  Coupon & structure. A coupon (interest rate) is paid periodically, or accrued and settled at maturity, against the principal. Pricing reflects the position, the recourse profile, the tenor, the LTV, and prevailing institutional credit conditions.
• v
  Recourse profile. The transaction is structured as non-recourse, limited-recourse, or full-recourse, depending on the shareholder’s objectives. Non-recourse structures protect the shareholder against a fall in the underlying below a defined threshold; full-recourse structures preserve maximum LTV.
• vi
  Dividends & corporate actions. Dividend flow is structured at the outset. The shareholder typically retains economic benefit of dividends, with timing and routing defined in the loan documentation. Corporate actions (rights issues, splits, mergers, takeovers) are addressed expressly.
• vii
  Repayment & release. On repayment of principal and any accrued coupon, the security interest is released and the pledged shares are returned to the shareholder’s control. The position is recovered in full; the shareholder’s economic exposure to the underlying is unchanged from inception.

A securities-backed loan is, in regulatory terms, a financing transaction, not a disposal. Whether it surfaces on a public register depends on the listing market and the shareholder’s status (controller, director, substantial holder). It also depends on the size of the pledged position relative to the issuer’s free float, and on the specific structure used.

In several major markets, a pledge of shares by a substantial shareholder is itself a disclosable event under the relevant beneficial-ownership or disclosure-of-interests regime. Examples include the U.S. Schedule 13D/13G framework under Section 13(d) of the Exchange Act of 1934, Hong Kong’s SFO Part XV Disclosure of Interests, and parallel regimes elsewhere.

In the EU and the UK, a pledge is notifiable under Article 19 of the Market Abuse Regulation where the pledgor is a director or other person discharging managerial responsibilities. The same applies to a person closely associated with one.

The major-holdings rules (DTR 5 in the UK, the WpHG in Germany) turn instead on who controls the voting rights. Each market’s specific framework, filing form, and timing requirement is summarised on the individual market pages.

For controlling shareholders, directors, and other regulated holders, additional regimes apply: takeover-code mechanics, insider-dealing rules, listing-rule restrictions on lock-ups and dealings, and (in some markets) tax-information-reporting frameworks. The discipline at the structuring stage is to map all relevant regimes against the contemplated transaction, and to structure timing, sequencing, and disclosure language accordingly.